The Obama administration is pumping $ 3 billion into programs to help the unemployed with foreclosure prevention. The Hardest Hit Fund would going to be doubled with one more $ 2 billion was announced last week to be put into the fund. A Housing and Urban Development program that is intended to help unemployed borrowers who’s mortgages are delinquent got an additional $ 1 billion. This could very well help banks rather than homeowners which concerns many experts.
Trying to stop foreclosure makes for a money pit
February was when the Hardest Hit Fund began to help unemployed foreclosures, helping states make their own foreclosure prevention programs. According to the Wall Street Journal, the program works with 10 states at present. The Troubled Asset Relief Program has $ 50 billion total to hand out witch then gets put into housing aid. The $ 2 billion infusion could be distributed to housing agencies in 17 states, plus the District of Columbia, that have the highest unemployment rates. HUD will get $ 1 billion for giving bridge loans with no interest up to $ 50,000 to those eligible who have to make mortgage payments for two years.
Hardest Hit Fund a drop within the bucket
The economic recovery is going down because of the housing market, which historically has helped all the recessions. Hardly any person can refinance or purchase although interest rates are at record lows, reports the New York Times. Anybody who is an unemployed homeowner has a very difficult time selling their home. The housing market gets worse with foreclosures make neighborhood values go down. The Hardest Hit Fund will help 140,000 borrowers if it really works right. With the new money, both the Hardest Hit and HUD programs could eventually help about 400,000 borrowers — a drop within the bucket set against 14.6 million unemployed and 3 million unemployed borrowers contemplating foreclosure.
Gravy train for mortgage lenders
Numerous think that banks will get more from the unemployed foreclosure funding than unemployed homeowners will. The Hill reported that senior fellow at the Center for American Progress, David Abromowitz said that unemployed borrowers shouldn’t be the only ones getting hit; banks should be hit too. Principal reductions on loans or other major modifications don’t have to be made by mortgage lenders which is a big problem. Abromowitz suggested that lenders should be required to make concessions and possibly even match funding. Those with underwater mortgages wouldn’t be helped too much with extra funding, says Dean Baker of the Center for Economic and Policy Research to the Hill. Dean said for the programs to work there has to be a reasonable expectation that homeowners can have some equity in their property at the end or they will lose their homes anyway.
Additional reading at these sites
Wall Street Journal
online.wsj.com/article/SB10001424052748704901104575423493999575302.html
New York Times
nytimes.com/2010/08/12/business/12treasury.html
The Hill
thehill.com/blogs/on-the-money/banking-financial-institutions/114349-banks-to-benefit-most-from-white-house-program-to-stave-off-foreclosures
